As an IP Strategist, I am fascinated by stories from which declining business fortunes can be traced directly to failed patent strategies. Often, the failures can be traced to patent attorney errors that limit the effectiveness of a company's patent to prevent competitive knock-offs, but, often, the problems can be traced to the lack of accountability for IP strategy within an organization. For those companies where IP is a primary driver of competitive advantage, the absence of someone who "owns" the job of making sure IP is properly captured and protected can result in unrecoverable errors that opens the innovator to unwelcome competition. In this regard, the recent loss of patent protection to a popular drug product should serve as a useful case study on why the C-suites of innovative companies should consider strategic in-house IP counseling to be a
In Part 1 of this "Failure to Create REAL Patent Value: Keurig's Story," I asserted that the company's current business woes can be directly attributable to a flawed patent strategy. To summarize, as a result of the Keurig Green Mountain's failure to obtain durable patent rights on its coffee pods, there has been a proliferation of lower cost generic pods. Because these generic pods sell for about 40% less than the branded "K-Cup" pods, Keurig Green Mountain has and will continue to lose substantial revenue due to this increased competition, even while its coffee maker innovation remains wildly popular with consumers. The question then becomes how did the company fail to fully capitalize on the value its disruptive innovation created in the marketplace? One can see what went wrong with Keurig Green Mountain's patent strategy by starting with the litigation record in which
Innovators--be they individuals or corporations--frequently view patent protection as the key to capturing value from the time and money invested in creating a successful product. Indeed, conventional wisdom dictates that a patent covering a true innovation will make it difficult, if not virtually impossible, for a competitor to legally provide a knock-off product to the same customer. Time and again, however, a successful product introduction will be followed by appearance in the market of a substitute product that provides the same consumer benefit but that also does not infringe the innovator's patent rights. In such a case, the innovator is not only faced with competition, it must now play in an increasingly price-eroded market, where such price erosion is likely more painful for the innovator because it made an investment that the knock-off company did not make. A familiar example of a product where the
The prevailing view of patent experts who advise innovators--be they individuals or companies--it that patent filings should occur as early as possible. This advice, which is even more prevalent now that the US has moved to a "first to file" system, exacerbates the significant problem of worthless patents that I have written about previously. To summarize, by "worthless," I mean that the innovator's patents will not cover anything that consumers desire to buy. Logic thus dictates that patents will be irrelevant to the startup, as well as expensive wastes of time, unless protection aligns with a validated customer demand for the innovator's product or technology. This is where a key difference falls out between the patent filing strategies for established companies and startups where each is developing innovative products or technology. The former already have products in the market and customers that
Patent lawyers almost always instruct inventors to file for patent protection at the earliest possible date, but maybe this is not the best advice for many startups. To the contrary, I think this conventional advice is flawed--at least when it applies to inventions involving unproven products with no known customer base. Put simply, unless customers show that they care about the product that will be covered by the patent such that they are willing to pay more than it costs to make the product in volumes that will lead to sustainable profits, the patent will provide value only for the attorney who files it. Indeed, the absence of customers who wanted to buy the product is why very few of the patents that I have obtained for
My response to the question posed in the title of this post is typically: “the only person who needs a patent is a patent attorney.” Indeed, if a patent attorney fails to convince clients like you that they need to obtain a patent, she will quickly lose her livelihood. You should therefore be skeptical if a patent attorney recommends that you move forward with a patent without also advising you to first fully evaluate your business model, your go-to-market strategy and the competitive landscape and determining along with you how the available patent protection may allow you to realize your company's revenue and exit goals.
This is not to say that patents are never the right thing or even often the right thing for entrepreneurs. To the contrary, examples abound for companies where patents served as a primary means of
The data coming out of the district courts and the USPTO make it fairly apparent that the "Software Patent Apocalypse" may be here, at least for the foreseeable future. This result has been widely predicted since the US Supreme Court decided Alice Corp. Pty. Ltd. v. CLS Bank International earlier in 2014, but facts now are coming out to demonstrate that the next few years will be tough for those who seek to obtain patent protection for inventions that fall into the realm of software.
We saw initial data from the district courts a couple of months ago when Timothy Lee of Vox.com presented data showing that a number of software patents had been found invalid as failing to claim patentable subject matter (a "Section 101 rejection" to us patent types) under the Alice rationale in
The Takeaway: In the 4th post in this Strategic Patenting Series, a case study is presented of a company that created durable market-making patent protection for a successful consumer product innovation using a disciplined patenting strategy. The strategic patenting efforts of Procter & Gamble undertook with its market-leading Swiffer Wet Jet® floor cleaning system allowed the company to create strong protection of the function of the basic product. This, in turn, resulted in protection of the underlying consumer benefits provided by this innovative floor cleaning system, a fact that allowed the company to prevent functional aspects of its system from being included in knock-off products. Moveover, P&G leveraged its ongoing consumer insights to continue to grow its patent portfolio. In short, the company's successful strategic patenting efforts have "made it cheaper to go through them than around them," thus contributing to its market leadership for this innovation for the past
The Take Away: Those seeking to generate market-making patent coverage for new innovations must recognize that patent coverage should focus not on how the problem is solved but instead on the benefits provided to the customer. Most patent coverage is directed to a specific solution to a customer need that is characterized in the form of an invention. Patents that cover only one solution to a broad customer need will permit competitors to solve the same customer need with a non-infringing substitute product, thus leaving the patent holder with no legal recourse against their competitor. On the other hand, market-making patent coverage focuses on the benefits provided to the customer, which means that competitors cannot sell the same benefit. Accordingly, patent coverage that emphasizes benefits over features will make it more difficult for competitors to provide the same solution to the customer. Innovators must
From the last post, we see that it is very rare for patents to create value for their owners. Moreover, if the "big guys" with pockets deep enough to hire the best lawyers can get it right only 5% of the time, there should be no doubt that smaller companies and individuals should re-examine the advice they are getting from their IP counsel. This is not to say that smaller companies and individuals cannot be successful in creating market-defining patent protection. To the contrary, it is my strong belief that small companies can create solid patent protection at a reasonable cost, but to do so will likely require patentees to recognize that their IP counsel likely has no clue how to do what you need done. And, even if she does, it is not her job to make